Mr. Darcy’s earth shattering results

Many thanks to Jim Reimer, VP of Exploration at Painted Pony Petroleum, for suggesting this week’s column and offering background material.

A flashback to history provides the background we need to understand why there is a technological revolution happening in the oil and gas industry and why peak oil theorists may need to go back to math class.

Imagine a Help Wanted poster that reads something like: “Able bodied and fearless worker willing to fill thin metal tubes with nitroglycerine. Successful applicant will be required to drop said tubes down oil wells. Preference will be given to those who can run fast. Explosions could maim or kill. No pension plan. Apply at head office for the position of Shooter.”

Welcome to ‘fracking,’ circa 1880. Back then it was called ‘shooting’ or ‘torpedoing’ a well, a procedure that was common in the early days of the oil and gas industry. Like today, the shooter’s objective of a century past was to shatter ‘tight,’ impermeable, oil-bearing rocks to make the coveted hydrocarbons flow to the surface faster, and ring in the revenue sooner. Yet unlike today, blowing up the bottom of an oil well often resulted in catastrophic damage to the hole, rendering the well useless with little more than a quick surge in production. Surely, there had to be easier ways to improve the flow.

Enter Mr. Darcy. Not the pent-up romantic in Jane Austen’s Pride and Prejudice, but rather the start-up mechanic, Henry Philibert Gaspard Darcy (1803-1858), a French engineer, who derived a famous law of fluid physics that bears his name.

Darcy’s Law, as applied to an oil well, says that the proprietor can do three things to improve the flow of his hydrocarbon treasure: (1) increase the pressure difference between the oil at the bottom of the hole relative to the surface; (2) enlarge the contact area between the sides of the well bore and the oil-bearing rock; or (3) open up the pores in the rock to channel more oil into the well (otherwise known as increasing the ‘permeability’).

For the first 100 years of the industry, up to about the mid-20th century, oilmen mostly left Darcy’s Law to nature. Back then it was relatively easy to find high-quality oil reservoirs with high enough pressure and permeability to push the fluid all the way up a vertical hole in the ground with no artificial intervention. But by the 1960s, it was getting harder to find wells that naturally optimized Darcy’s formula. After most of the high-pressure ‘gushers’ had been discovered (and brought under control by John Wayne) human intervention was needed to juice Darcy’s Law – without destroying the well, of course.

Engineers dusted off Darcy’s formula. Tinkering with the pressure dimension was the first place to start. Pumps and compressors were introduced on wells to either push or suck the hydrocarbons out of the ground with greater and greater vigor. Techniques included pumping water down into oil reservoirs, a common practice called ‘water flooding,’ that pushed trapped oil up a producing well.

Progressively higher-powered pumps, compressors and processes were developed over the next several decades with impressive results that brought on more oil production at relatively low cost. Yet, amidst the improvements, Darcy’s Law was still mostly untapped by human ingenuity. There were still two more dimensions ripe for tinkering. And so, in the 1970s, clever engineers began earnestly drilling wells not just vertically, perpendicularly through flatly oriented rocks, but also horizontally by bending the well 90 degrees through the oily formations.

Although the first horizontal wells go back to the 1940s, it was the emergence of new guidance technologies and tools (and an oil crisis) that championed the process 40 years ago. Result: the surface area of the well bore was greatly expanded, because the oil-bearing rock was being tracked instead of just being punctured at discrete locations. Consequently, Darcy’s second prescription for enhancing flow was now in play.

Many fold improvements in production were realized from horizontal drilling signaling another renewal; however, what was exciting for the engineer was sometimes chilling for the financier, because a corresponding multiple in investment returns was not always forthcoming. In other words, the added production from a horizontally drilled well often did not justify the added expense with the prevailing technologies of the day. As a result, horizontal drilling was employed only about 15% of the time, until the dawn of the 21st century.

Peak oil theorists, among others, have held to the notion that the diminishing number of gushers found over time, combined with progressively ‘maturing’ wells that can’t be pumped any harder, ultimately point to irreversible, downward trend lines for oil production. In part, this belief has assumed that rock permeability is a geological fixture that human ingenuity could not easily alter. Merit remains in some peak oil arguments, but in the last 10 years the industry has come full circle on Darcy’s Law, a largely unexpected event. No retro futurist, except those driven by ingenuity, counted on a resurgence of modern day ‘torpedoing’; in other words, man’s ability to inflict large-scale changes to Darcy’s calculus of flow through large-scale changes to permeability.

Hydraulic fracturing, or ‘fracking’ in the parlance, is now being applied to horizontal wells with greater and greater precision. Tools, techniques and digital sensing equipment provide modern day ‘shooters’ with an ability to increase the permeability of deep rocks with remarkable control and accuracy. Mating fracking with horizontal drilling and pressure-enhancing production equipment means that the industry has entered an era when human intervention can alter and optimize all three variables inscribed in Darcy’s Law. In short, tinkering one more time with a 150-year old mathematical equation is fracturing our long-held assumptions of how much crude oil and natural gas is exploitable through innovation.

Hydraulic fracturing is truly an ‘earth-shattering’ advance that has already shown its disruptive potential in North American natural gas supply and is showing similar patterns of change on the oil side too (see for example, Calgary Herald Blog Post, February 6th, 2012). If past tinkering with Darcy’s Law is any indication of future potential, the oil and gas industry is once again on a path to renewal for several decades to come.

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